Abstract/Summary

Cambodia is launching another phase of decentralisation, attempting to restructure sub-national, especiallyprovincial, administration. These reforms are widely referred to as decentralisation and deconcentrationor, more simply, as D&D. The aim is to establish unified provincial and possibly district administrations,which are accountable to both the central government and to the people in their territory, based on aclear and accountable allocation of functions and funding. To achieve this, more accountable fiscalrelationships and management are crucial. It is not known yet how these can be achieved. Discussionsindicate that a unified budget is going to be established, but details are by no means clear. This situationis not helped by the fact that current arrangements around provincial public finance are not yet wellunderstood.

This paper draws on research conducted over three years, as part of a wider study of sub-nationalaccountability, which included analysis of planning and human resources. This part of the study consideredcurrent provincial public expenditure management (PEM), using accountability as its analytical lens.The objective of all these studies was to provide a more comprehensive picture of the current system andfrom this to draw implications for the D&D reforms. The paper looks at two accountability relations:centralYprovincial and horizontal. Key findings are as follows:

Not just one but many provincial PEM systems operate. For analytical purposes, these can be groupedinto three main categories: the government mainstream system, reform initiatives around the mainstreamand donor vertical programmes. Each group entails different accountability structures.

Current arrangements are very centralised. Most of the development budget is locked into donor-funded,centrally directed programmes, which may be implemented sub-nationally but are usually containedwithin programmeYdedicated public finance arrangements, entailing very little subYnational discretion.With 80 percent of the countryГs development programmes financed from aid, this overall arrangementhas a huge impact, the implications of which need to be better understood. Provinces receive only about30 percent of recurrent funding and virtually none of the development budget. They enjoy very minimaldiscretion over their small entitlement, and correspondingly hold little real responsibility for the overalloperations of provincial or lower public management and finance. Their involvement in developmentactivities has typically (and with particular partial exceptions, such as SEILA programmes) been limitedand ad hoc. Their ability to link local planning, operating and maintenance (O&M), human resourcesmanagement and other key functions to predictable funding has thus been greatly constrained.

Centralisation is compounded by weaknesses in the accountability of the government mainstream PEM,which lead to high fiduciary risk and poor budget execution. These create strong incentives for donorsto manage programmes using centralised and parallel arrangements. There have been reform initiativesin response to these problems. Those reforms have produced fairly satisfactory results, but their scopeand intention were not to enhance the role of the province in PEM and wider accountability.

Instead,they focussed on improving service delivery in specific sectors. Donors have responded to weak PEMby bypassing it and introducing a New Public Management type of accountability.Alongside these formal accountability arrangements, another form is based on patronage networks ofpersonal relationships and loyalty, institutionalised rent seeking and political agendas. Patronage aroundprovincial PEM is dense and institutionalised, especially within the mainstream system. It has beenstrongly shaped by neo-patrimonial arrangements, wherein concerns for compliance have multipliedopportunities for informal deductions, and personalised yet regularised relationships have distortedprocesses, especially in some areas of PEM.

A number of implications, both general and particular, are drawn from the findings. Particularrecommendations are found in Chapter 6. More generally, the paperГs findings demonstrate that D&D willrequire a long-term reform effort, which will require proper sequencing and, in particular, a combination of both technical and politically driven reform. Second, the D&D reforms will and should impact on many aspects of current administration, including its internal/formal weakness, the strength of informal arrangements and the nature of donor-created accountabilities within programmes. If this reform is to move forward, it needs to be better coordinated with other reforms, especially in public financial management and in aid harmonisation, public sector and human resources management and, less directly, recent social accountability initiatives. Third, although reforms in Cambodia have been slow in general, the government, with support from donors, has implemented many, some more successfully than others. The important thing is that D&D need to build on these successes and learn from the failures.